- Cash generation is exceptional

- Full-year diluted EPS from continuing operations is $7.03

FALLS CHURCH, Va., Jan. 22, 2014 /PRNewswire/ -- General Dynamics (NYSE: GD) today reported 2013 fourth-quarter earnings from continuing operations of $624 million, or $1.76 per share on a fully diluted basis; revenues for the quarter were $8.1 billion. For the full year of 2013, earnings from continuing operations were $2.5 billion, or $7.03 per share fully diluted, on revenues of $31.2 billion.

Net earnings for fourth-quarter 2013 were $495 million, or $1.40 fully diluted, including a $129 million loss in discontinued operations related to the pending settlement of the long-standing A-12 litigation. Net earnings for the full year were $2.4 billion, or $6.67 per share fully diluted.

Margins

Company-wide operating margins in 2013 were 11.4 percent for the fourth quarter and 11.8 percent for the full year, increasing over 2012 margins calculated on a non-GAAP basis for the same periods. Aerospace and Combat Systems achieved significant margin expansion in 2013 and Marine Systems and IS&T margins were consistent with the company's expectations.

Cash

Net cash provided by operating activities totaled $1.6 billion in the fourth quarter of 2013 and $3.1 billion for the full year. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $1.4 billion in the quarter (222 percent of earnings from continuing operations) and $2.7 billion for the year (107 percent).

Backlog

The company's total backlog was $46 billion at the end of the year. In the fourth quarter, orders were strong in the Aerospace group across the Gulfstream fleet. Significant orders were also received for production of additional double-V-hulled Stryker combat vehicles and engineering development of the next Stryker upgrade program; for long-lead material for Virginia-class Block IV submarines and design work on the next-generation ballistic-missile submarine; and for weapons-systems development, information technology services and tactical network components and radios.

Estimated potential contract value, representing management's estimate of the value of unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised contract options, increased to $27.6 billion at year-end 2013. Total potential contract value, the sum of all backlog components, was $73.6 billion at the end of the year.

"General Dynamics performed well in 2013, reflecting our continued focus on operations, cost management, cash generation and our commitment to meeting our customers' requirements," said Phebe N. Novakovic, chairman and chief executive officer. "As promised, we managed our company prudently, adjusting our business to reflect the realities of the current defense spending environment and retiring risk throughout the organization."

General Dynamics, headquartered in Falls Church, Virginia, employs approximately 96,000 people worldwide. The company is a market leader in business aviation; land and expeditionary combat systems, armaments and munitions; shipbuilding and marine systems; and information systems and technologies. More information about the company is available on the Internet at www.generaldynamics.com.

Certain statements made in this press release, including any statements as to future results of operations and financial projections, may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements are based on management's expectations, estimates, projections and assumptions. These statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Therefore, actual future results and trends may differ materially from what is forecast in forward-looking statements due to a variety of factors. Additional information regarding these factors is contained in the company's filings with the Securities and Exchange Commission, including, without limitation, its Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q.

All forward-looking statements speak only as of the date they were made. The company does not undertake any obligation to update or publicly release any revisions to any forward-looking statements to reflect events, circumstances or changes in expectations after the date of this press release.

WEBCAST INFORMATION: General Dynamics will webcast its fourth-quarter securities-analyst conference call at 11:30 a.m. EST on Wednesday, January 22, 2014. The webcast will be a listen-only audio event, available at www.generaldynamics.com. An on-demand replay of the webcast will be available shortly after the conclusion of the call on January 22 and will continue for 12 months. To hear a recording of the conference call by telephone, please call 888-286-8010 (international: 617-801-6888); passcode 39157916. The phone replay will be available shortly after the conclusion of the call on January 22 through January 29, 2014.

EXHIBIT A

CONSOLIDATED STATEMENTS OF EARNINGS - (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS

Fourth Quarter

Variance

2012

2013

$

%

Revenues

$ 8,078

$ 8,107

$ 29

0.4 %

Operating costs and expenses

9,980

7,186

2,794

Operating earnings (loss)

(1,902)

921

2,823

148.4 %

Interest, net

(41)

(23)

18

Other, net

(128)

2

130

Earnings (loss) from continuing operations before income taxes

(2,071)

900

2,971

143.5 %

Provision for income taxes

59

276

(217)

Earnings (loss) from continuing operations

$ (2,130)

$ 624

$ 2,754

129.3 %

Discontinued operations, net of tax

-

(129)

(129)

Net earnings (loss)

$ (2,130)

$ 495

$ 2,625

123.2 %

Earnings (loss) per share - basic

Continuing operations

$ (6.07)

$ 1.78

$ 7.85

129.3 %

Discontinued operations

$ -

$ (0.37)

$ (0.37)

Net earnings (loss)

$ (6.07)

$ 1.41

$ 7.48

123.2 %

Basic weighted average shares outstanding

350.9

350.5

Earnings (loss) per share - diluted

Continuing operations

$ (6.07)

*

$ 1.76

$ 7.83

129.0 %

Discontinued operations

$ -

$ (0.36)

$ (0.36)

Net earnings (loss)

$ (6.07)

*

$ 1.40

$ 7.47

123.1 %

Diluted weighted average shares outstanding

350.9

*

354.6

* Fourth quarter 2012 amounts exclude dilutive effect of stock options and restricted stock as it would be antidilutive.

EXHIBIT B

CONSOLIDATED STATEMENTS OF EARNINGS - (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS

Twelve Months

Variance

2012

2013

$

%

Revenues

$ 31,513

$ 31,218

$ (295)

(0.9)%

Operating costs and expenses

30,680

27,533

3,147

Operating earnings

833

3,685

2,852

342.4 %

Interest, net

(156)

(86)

70

Other, net

(136)

8

144

Earnings from continuing operations before income taxes

541

3,607

3,066

566.7 %

Provision for income taxes

873

1,121

(248)

Earnings (loss) from continuing operations

$ (332)

$ 2,486

$ 2,818

848.8 %

Discontinued operations, net of tax

-

(129)

(129)

Net earnings (loss)

$ (332)

$ 2,357

$ 2,689

809.9 %

Earnings (loss) per share - basic

Continuing operations

$ (0.94)

$ 7.09

$ 8.03

854.3 %

Discontinued operations

$ -

$ (0.37)

$ (0.37)

Net earnings (loss)

$ (0.94)

$ 6.72

$ 7.66

814.9 %

Basic weighted average shares outstanding

353.3

350.7

Earnings (loss) per share - diluted

Continuing operations

$ (0.94)

*

$ 7.03

$ 7.97

847.9 %

Discontinued operations

$ -

$ (0.36)

$ (0.36)

Net earnings (loss)

$ (0.94)

*

$ 6.67

$ 7.61

809.6 %

Diluted weighted average shares outstanding

353.3

*

353.5

* 2012 amounts exclude dilutive effect of stock options and restricted stock as it would be antidilutive.

EXHIBIT C

REVENUES AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)

DOLLARS IN MILLIONS

Fourth Quarter

Variance

2012

2013

$

%

Revenues:

Aerospace

$ 1,861

$ 2,135

$ 274

14.7 %

Combat Systems

1,976

1,651

(325)

(16.4)%

Marine Systems

1,664

1,630

(34)

(2.0)%

Information Systems and Technology

2,577

2,691

114

4.4 %

Total

$ 8,078

$ 8,107

$ 29

0.4 %

Operating earnings (loss):

Aerospace

$ 69

$ 348

$ 279

404.3 %

Combat Systems

(136)

247

383

281.6 %

Marine Systems

196

159

(37)

(18.9)%

Information Systems and Technology

(2,014)

196

2,210

109.7 %

Corporate

(17)

(29)

(12)

(70.6)%

Total

$ (1,902)

$ 921

$ 2,823

148.4 %

Operating margins:

Aerospace

3.7 %

16.3 %

Combat Systems

(6.9)%

15.0 %

Marine Systems

11.8 %

9.8 %

Information Systems and Technology

(78.2)%

7.3 %

Total

(23.5)%

11.4 %

EXHIBIT D

REVENUES AND OPERATING EARNINGS BY SEGMENT - (UNAUDITED)

DOLLARS IN MILLIONS

Twelve Months

Variance

2012

2013

$

%

Revenues:

Aerospace

$ 6,912

$ 8,118

$ 1,206

17.4 %

Combat Systems

7,992

6,120

(1,872)

(23.4)%

Marine Systems

6,592

6,712

120

1.8 %

Information Systems and Technology

10,017

10,268

251

2.5 %

Total

$ 31,513

$ 31,218

$ (295)

(0.9)%

Operating earnings (loss):

Aerospace

$ 858

$ 1,416

$ 558

65.0 %

Combat Systems

663

904

241

36.3 %

Marine Systems

750

666

(84)

(11.2)%

Information Systems and Technology

(1,369)

795

2,164

158.1 %

Corporate

(69)

(96)

(27)

(39.1)%

Total

$ 833

$ 3,685

$ 2,852

342.4 %

Operating margins:

Aerospace

12.4 %

17.4 %

Combat Systems

8.3 %

14.8 %

Marine Systems

11.4 %

9.9 %

Information Systems and Technology

(13.7)%

7.7 %

Total

2.6 %

11.8 %

EXHIBIT E

PRELIMINARY CONSOLIDATED BALANCE SHEETS

DOLLARS IN MILLIONS

(Unaudited)

December 31, 2012

December 31, 2013

ASSETS

Current assets:

Cash and equivalents

$ 3,296

$ 5,301

Accounts receivable

4,204

4,402

Contracts in process

4,964

4,780

Inventories

2,776

2,968

Other current assets

504

435

Total current assets

15,744

17,886

Noncurrent assets:

Property, plant and equipment, net

3,403

3,415

Intangible assets, net

1,383

1,217

Goodwill

12,048

11,977

Other assets

1,731

953

Total noncurrent assets

18,565

17,562

Total assets

$ 34,309

$ 35,448

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$ 2,469

$ 2,248

Customer advances and deposits

6,042

6,584

Other current liabilities

3,109

3,362

Total current liabilities

11,620

12,194

Noncurrent liabilities:

Long-term debt

3,908

3,908

Other liabilities

7,391

4,845

Total noncurrent liabilities

11,299

8,753

Shareholders' equity:

Common stock

482

482

Surplus

1,988

2,226

Retained earnings

17,860

19,428

Treasury stock

(6,165)

(6,450)

Accumulated other comprehensive loss (AOCL)

(2,775)

(1,185)

Total shareholders' equity

11,390

14,501

Total liabilities and shareholders' equity

$ 34,309

$ 35,448

EXHIBIT F

PRELIMINARY CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)

DOLLARS IN MILLIONS

Twelve Months Ended

December 31, 2012

December 31, 2013

Cash flows from operating activities:

Net earnings (loss)

$ (332)

$ 2,357

Adjustments to reconcile net earnings to net cash provided by

operating activities:

Depreciation of property, plant and equipment

386

393

Amortization of intangible assets

234

163

Goodwill and intangible asset impairments

2,295

-

Stock-based compensation expense

114

120

Excess tax benefit from stock-based compensation

(29)

(23)

Deferred income tax (benefit) provision

(148)

104

Discontinued operations, net of tax

-

129

(Increase) decrease in assets, net of effects of business acquisitions:

Accounts receivable

240

(205)

Contracts in process

149

177

Inventories

(478)

(200)

Increase (decrease) in liabilities, net of effects of business acquisitions:

Accounts payable

(441)

(223)

Customer advances and deposits

730

330

Other current liabilities

22

(126)

Other, net

(55)

110

Net cash provided by operating activities

2,687

3,106

Cash flows from investing activities:

Capital expenditures

(450)

(440)

Purchases of available-for-sale securities

(252)

(135)

Sales of available-for-sale securities

186

99

Maturities of available-for-sale securities

110

14

Business acquisitions, net of cash acquired

(444)

(1)

Purchases of held-to-maturity securities

(260)

-

Maturities of held-to-maturity securities

224

-

Sales of held-to-maturity securities

211

-

Other, net

19

96

Net cash used by investing activities

(656)

(367)

Cash flows from financing activities:

Purchases of common stock

(602)

(740)

Dividends paid

(893)

(591)

Proceeds from option exercises

146

583

Other, net

(33)

23

Net cash used by financing activities

(1,382)

(725)

Net cash used by discontinued operations

(2)

(9)

Net increase in cash and equivalents

647

2,005

Cash and equivalents at beginning of period

2,649

3,296

Cash and equivalents at end of period

$ 3,296

$ 5,301

EXHIBIT G

PRELIMINARY FINANCIAL INFORMATION - (UNAUDITED)

DOLLARS IN MILLIONS EXCEPT PER SHARE AND EMPLOYEE AMOUNTS

Fourth Quarter

Fourth Quarter

2012

2013

Other Financial Information:

Return on equity (a)

(2.5)%

20.1%

Debt-to-equity (b)

34.3%

27.0%

Debt-to-capital (c)

25.6%

21.2%

Book value per share (d)

$ 32.20

$ 41.03

Total taxes paid

$ 350

$ 175

Company-sponsored research and development (e)

$ 79

$ 68

Employment

92,200

96,000

Sales per employee (f)

$ 337,300

$ 337,600

Shares outstanding

353,674,248

353,402,794

Non-GAAP Financial Measures:

Free cash flow from operations:

Quarter

Year-to-date

Quarter

Year-to-date

Net cash provided by operating activities

$ 780

$ 2,687

$ 1,556

$ 3,106

Capital expenditures

(164)

(450)

(169)

(440)

Free cash flow from operations (g)

$ 616

$ 2,237

$ 1,387

$ 2,666

Return on invested capital:

Earnings (loss) from continuing operations

$ (332)

$ 2,486

After-tax interest expense

109

67

After-tax amortization expense

152

106

Net operating profit (loss) after taxes

(71)

2,659

Average invested capital

17,223

15,989

Return on invested capital (h)

(0.4)%

16.6%

Notes describing the calculation of the other financial information and a reconciliation of non-GAAP financial measures are on the following page.

EXHIBIT G (cont.)

PRELIMINARY FINANCIAL INFORMATION - (UNAUDITED)

DOLLARS IN MILLIONS EXCEPT PER SHARE AND EMPLOYEE AMOUNTS

(a) Return on equity is calculated by dividing earnings from continuing operations for the latest 12-month period by our average equity during that period.

(b) Debt-to-equity ratio is calculated as total debt divided by total equity as of the end of the period.

(c) Debt-to-capital ratio is calculated as total debt divided by the sum of total debt plus total equity as of the end of the period.

(d) Book value per share is calculated as total equity divided by total outstanding shares as of the end of the period.

(e) Includes independent research and development costs and Gulfstream product-development costs.

(f) Sales per employee is calculated by dividing revenues for the latest 12-month period by our average number of employees during that period.

(g) We believe free cash flow from operations is a measurement that is useful to investors because it portrays our ability to generate cash from our core businesses for such purposes as repaying maturing debt, funding business acquisitions and paying dividends. We use free cash flow from operations to assess the quality of our earnings and as a performance measure in evaluating management. The most directly comparable GAAP measure to free cash flow from operations is net cash provided by operating activities.

(h) We believe return on invested capital (ROIC) is a measurement that is useful to investors because it reflects our ability to generate returns from the capital we have deployed in our operations. We use ROIC to evaluate investment decisions and as a performance measure in evaluating management. We define ROIC as net operating profit after taxes for the latest 12-month period divided by the sum of the average debt and shareholders' equity for the same period excluding any change in AOCL. Net operating profit after taxes is defined as earnings from continuing operations plus after-tax interest and amortization expense. The most directly comparable GAAP measure to net operating profit after taxes is earnings from continuing operations. After-tax interest and amortization expense is calculated using the statutory tax rate of 35 percent.

EXHIBIT H

BACKLOG - (UNAUDITED)

DOLLARS IN MILLIONS

Estimated

Total

Potential

Total Potential

Fourth Quarter 2013

Funded

Unfunded

Backlog

Contract Value*

Contract Value

Aerospace

$ 13,785

$ 158

$ 13,943

$ 1,679

$ 15,622

Combat Systems

5,571

1,113

6,684

3,664

10,348

Marine Systems

11,795

5,063

16,858

3,098

19,956

Information Systems and Technology

7,253

1,267

8,520

19,127

27,647

Total

$ 38,404

$ 7,601

$ 46,005

$ 27,568

$ 73,573

Third Quarter 2013

Aerospace

$ 13,653

$ 170

$ 13,823

$ -

$ 13,823

Combat Systems

6,164

954

7,118

3,622

10,740

Marine Systems

12,228

5,337

17,565

3,389

20,954

Information Systems and Technology

7,950

1,485

9,435

20,433

29,868

Total

$ 39,995

$ 7,946

$ 47,941

$ 27,444

$ 75,385

Fourth Quarter 2012

Aerospace

$ 15,458

$ 209

$ 15,667

$ -

$ 15,667

Combat Systems

7,442

1,298

8,740

2,794

11,534

Marine Systems

13,495

3,606

17,101

3,047

20,148

Information Systems and Technology

8,130

1,643

9,773

21,009

30,782

Total

$ 44,525

$ 6,756

$ 51,281

$ 26,850

$ 78,131

* The estimated potential contract value represents management's estimate of our future contract value under unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options associated with existing firm contracts, including options to purchase new aircraft and long-term agreements with fleet customers, as applicable. Because the value in the unfunded IDIQ arrangements is subject to the customer's future exercise of an indeterminate quantity of orders, we recognize these contracts in backlog only when they are funded. Unexercised options are recognized in backlog when the customer exercises the option and establishes a firm order.

EXHIBIT I

FOURTH QUARTER 2013 SIGNIFICANT ORDERS (UNAUDITED)

DOLLARS IN MILLIONS

We received the following significant orders during the fourth quarter of 2013:

Combat Systems

$230 from the U.S. Army for research, development and testing in preparation for the Stryker Engineering Change Proposal (ECP) upgrade program.

$125 from the Army under the Stryker wheeled armored vehicle program for the production of 30 double-V-hulled vehicles and for contractor logistics support.

$85 from the Canadian government to supply various caliber of ammunition.

$75 from the Army under a foreign military sales contract to provide contractor logistics support (CLS) services in Iraq.

The production of 130 Duro vehicles for Switzerland.

Marine Systems

$150 from the U.S. Navy for design work, including advanced nuclear studies, for the next-generation ballistic-missile submarine.

$120 from the Navy for long-lead material for three Virginia-class submarines under Block IV of the program.

$60 from the Navy to repair USS Carter Hall (LSD 50).

The design and construction of one product carrier from Seabulk Tankers, Inc., with an option to build an additional ship.

Information Systems and Technology

$140 from the Navy for production and support of the U.S. and U.K. Trident II submarine weapons systems.

$130 from the National Geospatial-Intelligence Agency (NGA) to consolidate NGA's operations from six locations to one stand-alone location at New Campus East (NCE).

$105 from the Army for production of 1,500 Manpack radios and over 500 accessory kits.

$105 from the Centers for Medicare & Medicaid Services for contact-center services, including the 1-800-MEDICARE program.

$95 from the Army under the Warfighter Information Network-Tactical (WIN-T) program for Increment 3 engineering and development.

$55 from the U.S. Department of State to provide supply chain management services.

EXHIBIT J

AEROSPACE SUPPLEMENTAL DATA - (UNAUDITED)

Fourth Quarter

Twelve Months

2012

2013

2012

2013

Gulfstream Green Deliveries (units):

Large aircraft

26

27

104

110

Mid-size aircraft

7

13

17

29

Total

33

40

121

139

Gulfstream Outfitted Deliveries (units):

Large aircraft

31

34

83

121

Mid-size aircraft

6

7

11

23

Total

37

41

94

144

Pre-owned Deliveries (units):

3

2

4

11

APPENDIX

Exhibits K through M on the following pages were included in the 4Q12 earnings release and are provided herein to facilitate the comparison to 2013 operating results.

EXHIBIT K

CALCULATION OF ADJUSTED NON-GAAP EARNINGS FROM CONTINUING OPERATIONS AND

ADJUSTED NON-GAAP DILUTED EARNINGS PER SHARE - (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS

Fourth Quarter

Twelve Months

2012

2012

Calculation of adjusted non-GAAP earnings from continuing operations:

Loss from continuing operations (from Exhibits A and B, respectively)

$ (2,130)

$ (332)

Non-GAAP adjustments:

Goodwill impairment (a)

1,994

1,994

Intangible asset impairments (a)

301

301

Contract disputes accruals (b)

292

292

Restructuring-related charges (c)

98

98

Inventory-related charges (d)

53

78

Debt retirement charge (e)

123

123

Tax effects (f)

(240)

(249)

Adjusted non-GAAP earnings from continuing operations

$ 491

$ 2,305

Calculation of diluted (loss) earnings per share from continuing operations:

This Exhibit includes the following financial measures which are not calculated in accordance with generally accepted accounting principles (GAAP) in the United States – adjusted earnings from continuing operations and adjusted diluted earnings per share from continuing operations. Each of these calculations excludes the impact of certain items and therefore, is considered a non-GAAP financial measure. The items excluded were considered by management to be unusual and not reflective of the underlying performance of the company as explained in the notes for each item. The GAAP financial measure most directly comparable to adjusted earnings from continuing operations is loss from continuing operations and the GAAP financial measure most directly comparable to adjusted diluted earnings per share is diluted loss per share. Reconciliations of each of these non-GAAP financial measures to the corresponding GAAP financial measure are included above. Management uses these measures to evaluate the operating performance of the company and analyze trends. For this reason, management believes the measures are useful supplemental information for investors to understand the company's operating results. Notes describing each non-GAAP adjustment are on the following page.

EXHIBIT K (cont.)

CALCULATION OF ADJUSTED NON-GAAP EARNINGS FROM CONTINUING OPERATIONS AND

ADJUSTED NON-GAAP DILUTED EARNINGS PER SHARE - (UNAUDITED)

DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS

(a) Impairments- Represents goodwill impairment charge of $1,994 in the Information Systems and Technology group and intangible asset impairments of $191 in the Aerospace group and $110 in the Information Systems and Technology group. Management believes that the exclusion of these items is useful because management does not consider impairment charges in evaluating the operating performance of its ongoing operations. The exclusions permit investors to evaluate the company's performance and analyze trends in a similar manner as management.

(b) Contract disputes accruals- Represents accruals of $292 for contract disputes related to the Combat System group's European Land Systems business, primarily with the government of Portugal. While the company has contract disputes from time to time, management believes this item is unique due to the nature of the disputes and not reflective of the operating performance of its underlying operations. The exclusion permits investors to evaluate the company's performance in a similar manner as management and facilitates a comparison of its operating performance to the company's past operating performance.

(c) Restructuring-related charges- Represents restructuring-related charges of $98, primarily severance costs, related to the Combat System group's European Land Systems business. Management believes that the exclusion of this item is useful because management does not consider this item as reflective of its operating performance of its underlying operations. The exclusion permits investors to evaluate the company's performance in a similar manner as management and facilitates a comparison of its operating performance to the company's past operating performance.

(d) Inventory-related charges- Represents increases to inventory reserves for obsolete inventory in the Information Systems and Technology group of $38 and in the Combat Systems group of $15 for the quarter ended December 31, 2012. Represents increases to inventory reserves for obsolete inventory in the Information Systems and Technology group of $63 and in the Combat Systems group of $15 for the twelve months ended December 31, 2012. The Information System and Technology charge was primarily for ruggedized hardware products that ceased production in 2012. Management has adjusted for this item because it does not believe that it is indicative of its on-going operations or the on-going operating costs of its products since it does not generally build products to inventory within its defense groups. The exclusion permits investors to evaluate the company's performance in a similar manner as management and facilitates a comparison of its operating performance to the company's past operating performance.

(e) Debt retirement charges- Represents the premium associated with the early redemption of debt completed in December 2012. Management has excluded this item for comparative purposes and views this charge as uniquely related to its debt refinancing completed in 2012. By excluding this item, investors can evaluate the company's performance in a similar manner as management.

(f) Tax effects- Represents the limited tax benefit on the charges in (a) - (e) due to the non-deductible nature of a substantial portion of the charges. The tax effects of these changes have been reflected because management evaluates performance on an after-tax basis. This permits investors to evaluate the company's performance in a similar manner as management and compare the operating performance of the company to prior periods.

(g) Calculated based on basic weighted average shares outstanding as the inclusion of dilutive securities (stock options and restricted stock) would have an antidilutive effect.

EXHIBIT L

CALCULATION OF ADJUSTED NON-GAAP REVENUES

AND ADJUSTED NON-GAAP OPERATING EARNINGS BY SEGMENT - (UNAUDITED)

DOLLARS IN MILLIONS

GAAP

Adjusted

Fourth Quarter

Non-GAAP

2012

Non-GAAP

Fourth Quarter

(from Exhibit C)

Adjustments

2012

Revenues:

Aerospace

$ 1,861

$ -

$ 1,861

Combat Systems

1,976

169

(a)

2,145

Marine Systems

1,664

-

1,664

Information Systems and Technology

2,577

-

2,577

Total

$ 8,078

$ 169

$ 8,247

Operating earnings (loss):

Aerospace

$ 69

$ 191

(b)

$ 260

Combat Systems

(136)

405

(c)

269

Marine Systems

196

-

196

Information Systems and Technology

(2,014)

2,142

(d)

128

Corporate

(17)

-

(17)

Total

$ (1,902)

$ 2,738

$ 836

Operating margins:

Aerospace

3.7 %

14.0 %

Combat Systems

(6.9)%

12.5 %

Marine Systems

11.8 %

11.8 %

Information Systems and Technology

(78.2)%

5.0 %

Total

(23.5)%

10.1 %

This Exhibit includes the following financial measures which are not calculated in accordance with generally accepted accounting principles (GAAP) in the United States – adjusted revenues and operating earnings by segment. Each of these calculations excludes the impact of certain items and therefore, is considered a non-GAAP financial measure. The items excluded were considered by management to be unusual and not reflective of the underlying performance of the company. The GAAP financial measure most directly comparable to adjusted revenues by segment is revenues by segment and the GAAP financial measure most directly comparable to adjusted operating earnings by segment is operating earnings by segment. Reconciliations of each of these non-GAAP financial measures to the corresponding GAAP financial measure are included above. Management uses these measures to evaluate the operating performance of the company and analyze trends. For this reason, management believes the measures are useful supplemental information for investors to understand the company's operating results. Notes describing each non-GAAP adjustment are on the following page.

EXHIBIT L (cont.)

CALCULATION OF ADJUSTED NON-GAAP REVENUES

AND ADJUSTED NON-GAAP OPERATING EARNINGS BY SEGMENT - (UNAUDITED)

DOLLARS IN MILLIONS

(a) Represents the portion of the $292 of contract disputes accruals related to the contract with the government of Portugal in the Combat Systems group from Exhibit K that was recorded as a reduction of revenue.

(b) Represents intangible asset impairment of $191 in the Aerospace group from Exhibit K.

(c) Represents contract disputes accruals of $292, restructuring-related charges of $98 and inventory-related charges of $15 in the Combat Systems group from Exhibit K.

(d) Represents goodwill impairment of $1,994, intangible asset impairment of $110 and inventory-related charges of $38 in the Information Systems and Technology group from Exhibit K.

EXHIBIT M

CALCULATION OF ADJUSTED NON-GAAP REVENUES

AND ADJUSTED NON-GAAP OPERATING EARNINGS BY SEGMENT - (UNAUDITED)

DOLLARS IN MILLIONS

GAAP

Adjusted

Twelve Months

Non-GAAP

2012

Non-GAAP

Twelve Months

(from Exhibit D)

Adjustments

2012

Revenues:

Aerospace

$ 6,912

$ -

$ 6,912

Combat Systems

7,992

169

(a)

8,161

Marine Systems

6,592

-

6,592

Information Systems and Technology

10,017

-

10,017

Total

$ 31,513

$ 169

$ 31,682

Operating earnings (loss):

Aerospace

$ 858

$ 191

(b)

$ 1,049

Combat Systems

663

405

(c)

1,068

Marine Systems

750

-

750

Information Systems and Technology

(1,369)

2,167

(d)

798

Corporate

(69)

-

(69)

Total

$ 833

$ 2,763

$ 3,596

Operating margins:

Aerospace

12.4 %

15.2 %

Combat Systems

8.3 %

13.1 %

Marine Systems

11.4 %

11.4 %

Information Systems and Technology

(13.7)%

8.0 %

Total

2.6 %

11.4 %

This Exhibit includes the following financial measures which are not calculated in accordance with generally accepted accounting principles (GAAP) in the United States – adjusted revenues and operating earnings by segment. Each of these calculations excludes the impact of certain items and therefore, is considered a non-GAAP financial measure. The items excluded were considered by management to be unusual and not reflective of the underlying performance of the company. The GAAP financial measure most directly comparable to adjusted revenues by segment is revenues by segment and the GAAP financial measure most directly comparable to adjusted operating earnings by segment is operating earnings by segment. Reconciliations of each of these non-GAAP financial measures to the corresponding GAAP financial measure are included above. Management uses these measures to evaluate the operating performance of the company and analyze trends. For this reason, management believes the measures are useful supplemental information for investors to understand the company's operating results. Notes describing each non-GAAP adjustment are on the following page.

EXHIBIT M (cont.)

CALCULATION OF ADJUSTED NON-GAAP REVENUES

AND ADJUSTED NON-GAAP OPERATING EARNINGS BY SEGMENT - (UNAUDITED)

DOLLARS IN MILLIONS

(a) Represents the portion of the $292 of contract disputes accruals related to the contract with the government of Portugal in the Combat Systems group from Exhibit K that was recorded as a reduction of revenue.

(b) Represents intangible asset impairment of $191 in the Aerospace group from Exhibit K.

(c) Represents contract disputes accruals of $292, restructuring-related charges of $98 and inventory-related charges of $15 in the Combat Systems group from Exhibit K.

(d) Represents goodwill impairment of $1,994, intangible asset impairment of $110 and inventory-related charges of $63 in the Information Systems and Technology group from Exhibit K.